JDA Breaks Records in Q4 Thanks to i2 Acquisition

February 7, 2011 Timothy Prickett Morgan

JDA Software, which sells retailing and supply chain application software, has successfully integrated its i2 Technologies acquisition and is showing good financial results in 2010 thanks to that deal.

In the fourth quarter ended on December 31, JDA posted $168,8 million in aggregate revenues, up 57.5 percent and driven primarily from the acquisition of i2. However, higher costs on most fronts plus $14 million in litigation costs relating to a lawsuit that has been going on for years with i2 cut into profits. Net income fell by 31.2 percent, to $5.8 million. Had it not been for the lawsuit, where a Texas jury awarded Dillard’s department stores a stunning $246 million judgment last June and another patent suit that JDA is in with Oracle, net income would have more than doubled for the combined JDA-i2 companies. This, no doubt, was the plan when the merger was consummated. JDA is fighting the judgment and obviously hopes to overturn the ruling or crimp the damages awarded.

In the final quarter of 2010, JDA’s software license sales rose by 32.8 percent, to $36.7 million, while subscriptions and other recurring revenues (mostly for cloudy versions of its software) more than quintupled to $5.3 million. Maintenance revenues in the quarter were up 37.1 percent, to $64.4 million. Consulting services revenues hit $56.2 million, nearly double from a year ago, and other revenues more than doubled to $6.2 million. The company did 25 deals worth more than $1 million and 19 deals that involved more than one product; the average selling price for each deal was $601,000. Generally speaking, in Q4, the JDA-Manugistics part of the company accounted for about three quarters of the revenues, with i2 making up the other quarter. For the full year, the split was closer to 60-40.

For the full year, JDA raked in $617.2 million in revenues, but only brought $17.7 million to the bottom line. Without the $14 million in legal costs associated with the i2 lawsuit with Dillard’s department stores, profits would have only been up a smidgen, and that is just reflective of the time it takes to wring the costs out of what is essentially three merged supply chain companies–JDA, Manugistics, and i2.

JDA ended the quarter and the year with $171.6 million in cash, which it is clearly going to need more of if this ruling in the Texas courts regarding Dillard’s sticks. JDA boosted its reserve for this judgment from $5 million to $19 million, reflecting what it now thinks the likely settlement to be based on preliminary mediation talks with the store chain. The trial against Oracle over software patents starts in March. JDA expects both cases to burn about $10 million in 2011.

In a conference call with Wall Street analysts, Hamish Brewer, chief executive officer at JDA, said that the North American region broke records for sales, but admitted that sales in Europe were weaker than expected.

Looking ahead to 2011, Brewer said he expected JDA to push $650 million to $690 million in revenues, with software license sales of between $145 million and $160 million. Earnings per share are expected to be in the range of $2 to $2.20, about four times what the company did in 2010.